Proposed amendments to due process: after this, we move at the speed of light!

The Trustees of the IFRS Foundation are inviting stakeholder comment on proposed amendments to its Due Process Handbook, the procedural requirements followed by the International Accounting Standards Board and the IFRS Interpretations Committee.

I’ve never been too interested in the internal workings of the IFRS Foundation – I’m only really bothered with what comes out of it. A few years ago I recall a minor Twitter flurry regarding supposed funding irregularities and potential governance scandals, but I never bothered to follow the details, and at some point it all died out. I did write a few years ago on the Trustee’s review of the Foundation’s structure and effectiveness, but I commented that much of what they proposed seemed to me “theatre rather than substance, analogous to tweaking the grandiose rituals of airport security.” Anyway, the new proposed amendments “reflect responses to a stakeholder perception survey in 2017 that showed the Foundation’s due process is highly regarded but that some stakeholders question whether the due process could be made more efficient without having a negative impact on the quality of work.” Here’s the summary:

  • (a) update the procedures relating to effect analysis;
  • (b) clarify the role and status of agenda decisions published by (IFRIC);
  • (c) provide the Board with the ability to publish its own agenda decisions;
  • (d) reflect that entities should be entitled to sufficient time to consider an agenda decision and if necessary, implement an accounting policy change;
  • (e) refine the categorization and review of educational material produced by the IFRS Foundation;
  • (f) refine the consultation required before adding major projects to the Board’s work plan; and
  • (g) clarify the (Due Process Oversight Committee’s) oversight of the IFRS Taxonomy due process and bring greater clarity to the approval and review process associated with the issuance and publication of IFRS Taxonomy updates.

It will take a far more forensically-minded person than myself to provide meaningful input into any of these suggestions. Some of them might sound promising at first glance, like the item about refining the consultation required before adding major projects to the work plan. But here’s what that actually means:

  •  (a) require the Board to consult before formally adding a major project to the work plan (either the research programme or the standard-setting programme) if that project was not specifically contemplated in the most recent agenda consultation; and
  • (b) explain in cases in which a project was specifically contemplated in the most recent agenda consultation, the Board is not required to consult the Advisory Council and ASAF when it moves a project from the research programme to the standard-setting programme.

Will such steps make the due process more efficient without having a negative impact on the quality of work? Beats me. The truth is, perhaps, that I wouldn’t personally be too offended by a more activist, self-determined IASB. I sometimes mull over the length of time consumed by major projects: recall for example, how the IASB and FASB’s joint project on revenue commenced in 2002, leading to a discussion paper in 2008, an initial exposure draft in 2010, a new standard in 2014 and (following a one-year deferral) an effective date in 2018. I realize there are good reasons for such careful deliberation and that the IASB is well-advised in treading carefully, given the cost and effort that its decisions may entail for individual entities. And yet, I can’t help sometimes wonder: if investors are being so mis-served by the old standards that such grand change is necessary, then isn’t that necessarily a matter of urgency (put another way, if it’s OK for a project to extend over sixteen years, doesn’t it really only mean that it’s not a big deal if it never gets done at all…)? For a reference point, the project commenced early in the Bush years, lasted through eight years of Obama and finally became effective mid-way (I pray it’s mid-way and not a quarter-way) through Trump. Think of all the upheaval and switching and swerving and evolution during those times, or even just in the last two years. Is the slow pace of standard-setting essentially a function of a small group of interested parties who fret too much, something facilitated by the fact of the rest of the world caring too little…?

Anyway, comments are requested on the proposed amendments by July 29, 2019. Much of the focus may be on the “agenda decisions” by which IFRIC decides not to recommend standard-setting in response to a submitted question. The concern has swirled around for a while that practitioners may not all share a common view of the importance of such agenda decisions, or of how to proceed when an agenda decision may suggest to an entity that it needs to change an accounting policy. It’s no doubt worthwhile to clarify this area, but again, there’s something blackly amusing about so much angst flowing from something the IFRIC didn’t do. As one of the proposed changes is to facilitate the IASB itself also issuing such agenda decisions, the future angst may flow all the thicker…

The opinions expressed are solely those of the author

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